Posts Tagged ‘entitlements’

Who destroyed the economy in 2008? Democrats say it was Bush. Why? Well, because he was president, that’s why.

Why – when applying the same logic – Barack Obama STILL isn’t responsible for any of his economic mess fully two years after George W. Bush left office is anybody’s guess.

But stop and think. The primary cause for the 2008 economic meltdown was a downturn in the housing market and the underlying mortgage market.

At the core of that meltdown was GSEs (that’s “Government Sponsored Enterprises” to you) Fannie Mae and Freddie Mac.

The problem with Fannie Mae and Freddie Mac has always been that it was – and remains – a social welfare institution masquerading as a financial institution. And they have made beyond-godawful “financial” decisions because their true loyalty has always been with socialist policies rather than financial ones.

Fannie Mae and Freddie Mac, the mortgage firms operating under federal conservatorship, may cost taxpayers as much as $685 billion as the US covers losses and overhauls the housing-finance system, Standard & Poor’s said.

Costs for resolving the two government-sponsored entities could reach $280 billion, including $148 billion already delivered under a US Treasury Department promise of unlimited support, New York-based S&P said yesterday in a research report. The government may spend an additional $405 billion to capitalize a replacement for the two companies, which own or insure more than half the US mortgage market.

“It appears unlikely in our view that housing and mortgage markets will be able to operate normally without continuing and substantial government involvement,” S&P said, citing the GSEs’ growing portfolio of unsold homes, a sluggish economy, high unemployment, the prospect of rising foreclosures and billions in legacy losses.

Treasury Secretary Timothy F. Geithner, who has said there is a strong case to be made for continued US involvement, has promised to deliver the Obama administration’s plan to overhaul the housing-finance system by the end of January. Republican lawmakers, who will take control of the House of Representatives in January, have called for the government to end its support for Washington-based Fannie Mae and Freddie Mac, of McLean, Va.

“Although federal authorities have taken no concrete public steps toward sponsoring a GSE alternative, Standard & Poor’s believes that it’s a useful exercise to consider how much such a recapitalization might cost taxpayers,” the report said.

$685 BILLION. That’s quite a mess.

Did it just happen? Hardly. This was going on for years. This was what caused the subprime crisis that destroyed our economy in 2008.

Let’s survey the record. According to record provided by The New York Times, Fannie and Freddie were in huge trouble PRIOR TO the economic collapse. And their holdings were so massive that there is simply no reasonable way that one can maintain that their crisis didn’t directly contribute to the greater crisis to be revealed. Read the article dated July 11, 2008:

Fannie Mae and Freddie Mac are so big — they own or guarantee roughly half of the nation’s $12 trillion mortgage market — that the thought that they might falter once seemed unimaginable. But now a trickle of worries about the companies, which has been slowly building for years, has suddenly become a torrent.

A timeline of the subprime loan crisis of 2008 clearly reveals that it was Fannie Mae’s collapse that started the entire mess rolling downhill. From Wikipedia:

September 2008

September 7: Federal takeover of Fannie Mae and Freddie Mac, which at that point owned or guaranteed about half of the U.S.’s $12 trillion mortgage market, effectively nationalizing them. This causes panic because almost every home mortgage lender and Wall Street bank relied on them to facilitate the mortgage market and investors worldwide owned $5.2 trillion of debt securities backed by them.[151][152]

September 16: Moody’s and Standard and Poor’s downgrade ratings on AIG‘s credit on concerns over continuing losses to mortgage-backed securities, sending the company into fears of insolvency.[155][156] In addition, the Reserve Primary Fund “breaks the buck” leading to a run on the money market funds. Over $140 billion is withdrawn vs. $7 billion the week prior. This leads to problems for the commercial paper market, a key source of funding for corporations, which suddenly could not get funds or had to pay much higher interest rates.[157]

September 18: Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke meet with key legislators to propose a $700 billion emergency bailout through the purchase of toxic assets. Bernanke tells them: “If we don’t do this, we may not have an economy on Monday.”[158]

Seventeen. That’s how many times, according to this White House statement (hat tip Gateway Pundit), that the Bush administration has called for tighter regulation of the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.

That’s right. George Bush tried SEVENTEEN TIMES to reform and regulate Fannie Mae and Freddie Mac, the agencies at the epicenter of the economic crisis.

Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980′s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

What do we have, even in the pages of the New York Times? A prediction that as soon as the economy cooled off, the mortgage market would explode like a depth charge and the government would have to step in to prevent a catastrophe. And from a Clinton program, at that.

WASHINGTON, Sept. 10— The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

So Bush WANTED to regulate and reform the industry that would destroy the economy five years later, again, in contradiction to a blatantly dishonest and ideologically liberal and biased media. Bush didn’t “refuse to regulate.” Bush TRIED to provide the necessary regulatory steps that could have averted disaster.

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed.

”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

Congress chartered Fannie and Freddie to provide access to home financing by maintaining liquidity in the secondary mortgage market. Today, almost half of all mortgages in the U.S. are owned or guaranteed by these GSEs. They are mammoth financial institutions with almost $1.5 Trillion of debt outstanding between them. With the fiscal challenges facing us today (deficits, entitlements, pensions and flood insurance), Congress must ask itself who would actually pay this debt if Fannie or Freddie could not?

And it came to pass exactly as John McCain warned.

Because of Democrats. Who were virtually entirely to blame for the disaster that ensued as a result of their blocking of reform and regulation.

What did Democrats do with the mainstream media’s culpability? They falsely dropped the crisis at the feet of “greedy” Wall Street. But while examples of Wall Street greed abound, the liberal intelligentsia deliberately overlooked the central and preceding role of Democrat-dominated Fannie Mae and Freddie Mac.

Here’s how the mess actually happened:

The New York Times acknowledged that Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac “buy mortgages from lenders and repackage them as securities or hold them in their own portfolios.”

Lenders also have opened the door wider to minorities because of new initiatives at Fannie Mae and Freddie Mac–the giant federally chartered corporations that play critical, if obscure, roles in the home finance system. Fannie Mae and Freddie Mac buy mortgages from lenders and bundle them into securities; that provides lenders the funds to lend more. . . .

In a nutshell, Fannie and Freddie, in their role as Government Sponsored Enterprises, bought tens of millions of mortgages, and then repackaged them into huge mortgage-backed securities that giant private entities such as Bear Stearns, AIG and Lehman Brothers purchased. What made these securities particularly attractive to the private banking entities was that these securities were essentially being sold – and had the backing – of the United States government. Fannie Mae and Freddie Mac, again, are Government Sponsored Enterprises.

The Role of the GSEs is to provide liquidity and stability to the U.S. housing and mortgage markets. Step 1 Banks lend money to Households to purchase and refinance home mortgages Step 2 The GSEs purchase these mortgage from the banks Step 3 GSEs bundle the mortgages into mortgage-backed securities Step 4 GSEs sell mortgage-backed and debt securities to domestic and international capital investors Step 5 Investors pay GSEs for purchase of debt and securities Step 6 GSEs return funds to banks to lend out again for the issuance of new mortgage loans.

Now, any intelligent observer should note a primary conflict that amounts to a fundamental hypocritical contradiction: the GSE’s role was to “provide stability,” and yet at the same time they were taking on “significantly more risk” in the final year of the Clinton presidency. What’s wrong with this picture?

The GSEs Fannie Mae and Freddie Mac were designed to bundle up the mortgages into mortgage backed securities and then sell them to the private market.

Fannie Mae is exempt from SEC [Securities and Exchange Commission] regulation. Which screams why Bush wanted to regulate them. This allowed Fannie Mae to bundle up mortgages, which were then rated AAA with no requirement to make clear what is in the bundle. Which screams why Bush wanted to regulate them.

This is what allowed the toxic instruments that have been sold across the world to proliferate. And then to explode. It also created a situation where money institutions did not know and could not find out whether potential inter-bank business partners were holding these “boiled babies on their books, complete with a golden stamp on the wrapping,” rather than safe instruments. This then inclined banks to a natural caution, to be wary of lending good money to other banks against these ‘assets’. And thus banks refused to lend to one another.

And it was Democrats, not Bush, and not Republicans, who were all over this disaster that destroyed our economy in 2008.

We were led by a pathologically dishonest media to believe that Republicans had created this mess, when it fact it had been Democrats. And so we gave the very fools who destroyed our economy total power.

Apparently Ron Wyden joins such illustrious Democrat company as John Conyers (“What good is reading the bill…?”), Nancy Pelosi (“We have to pass the bill so that you can find out what is in it”), and Ben Nelson (“I don’t think you want me to waste my time to read every page of the health care bill”), in not bothering to read the evil ObamaCare bill that he personally voted for and vigorously supported.

I’m wondering if the only Democrat who actually bothered to read the health care takeover bill he voted for is John Dingell, who accurately said of the bill, “It takes a long time to do the necessary administrative steps that have to be taken to put the legislation together to control the people.”

Here’s the story of Democrat Senator Ron Wyden (D-OR) actively turning against the ObamaCare boondoggle:

SEPTEMBER 3, 2010Wyden Defects on ObamaCareThe Oregon Democrat breaks ranks with the White House.
Most Democrats have come to understand that they can’t run on ObamaCare, but few have the temerity of Ron Wyden. The Oregon Senator is the first to break with the policy underpinnings of the bill he voted for.

Last week Mr. Wyden sent a letter to Oregon health authority director Bruce Goldberg, encouraging the state to seek a waiver from certain ObamaCare rules so it can “come up with innovative solutions that the Federal government has never had the flexibility or will to implement.”

One little-known provision of the bill allows states to opt out of the “requirement that individuals purchase health insurance,” Mr. Wyden wrote, and “Because you and I believe that the heart of real health reform is affordability and not mandates, I wanted to bring this feature of Section 1332 to the attention of you and the legislature.”

Now, that’s news. One of the Democratic Party’s leading experts on health care wants his state to dump the individual mandate that is among ObamaCare’s core features. The U-turn is especially notable because Mr. Wyden once championed an individual mandate in the bill he sponsored with Utah Republican Bob Bennett. We have differences with Wyden-Bennett, but it was far better than ObamaCare and would have changed incentives by offering more choices to individuals and spurring competition among providers and insurers.

Mr. Wyden should have known better than to vote for ObamaCare given his market instincts and health-care experience. Even so, the price for his support included the Section 1332 waivers that he is now promoting. In addition to the individual mandate, states may evade regulations about business taxes, the exact federal standards for minimum benefits, and how subsidies are allocated in the insurance “exchanges”—as long as the state covers the same number of uninsured and keeps coverage as comprehensive.

Medicaid also grants some indulgences toward state flexibility, even if those waivers are difficult to acquire. The Secretary of Health and Human Services would need to approve the ObamaCare alternative of Oregon or any other states, and the waivers don’t start until 2017, three years after ObamaCare is supposed to be up and running. It is also hard to see how anyone in the current Administration would grant them.

These practical realities aside, Mr. Wyden’s move may be more important as a political signal. Mr. Wyden is running for re-election this year. And while he is now well ahead of GOP challenger Jim Huffman, in a year like this one he has cause to avoid becoming Barbara Boxer or Patty Murray, who may lose because they’ve remained liberals from MSNBC central casting.

This sort of thing also isn’t supposed to happen to newly passed entitlements. Democrats have long believed that once an entitlement passes, however unpopular at the time, voters and business will grow to like it and then Republicans begin to come around. The exception was a catastrophic-coverage program to replace private “Medigap” policies, which Democrats passed in 1988 and repealed a year later amid a public furor.

On ObamaCare, Democrats are having the first political second thoughts, at least in this election season. Mr. Wyden is essentially saying that what his party passed is not acceptable, and if such thinking builds, opponents may have a real chance to replace ObamaCare with something better.

Never forget, “Democrat” actually stands for “Demonic bureaucrat.” And whenever Obama or Democrat leadership needs a vote from a Democrat, they’ll get it. Votes are largely assigned in the party machine. Nancy Pelosi and Harry Reid will allow vulnerable members to vote ‘no’ on their pork barrel bills if they have enough votes to pass them. But virtually all of those representatives and senators who voted ‘no’ on bills like the $862 billion stimulus and ObamaCare would have voted ‘yes’ if it had been necessary for them to do so.

And just as many Democrats said they’d vote against ObamaCare until they voted for it (think Bart Stupak and his gang of supposedly pro-life Democrats) – often getting incredibly sweetheart deals for their treachery (think “Louisiana Purchase,” think “Cornhusker Kickback,” among others), the fact of the matter is that you can’t trust Democrats to follow through with whatever the hell they promise they will or won’t do. If you like relentless liberal socialism, then vote for Democrats. But don’t be stupid and vote for your Senator or Representative because they say they’ll oppose Obama. Because the next time they’re needed, they’ll be right back on board, voting as they’re told to vote.

I mean, quit being Charlie Brown thinking Lucy will finally hold the football so you can kick it. She won’t. And Democrats won’t oppose the liberal agenda; they’ll support it, they’ll be its footsoldiers, just like they were the last two years.

If you want less of this, please don’t vote for the party that imposed it. Vote for the party that united against it: the Republican Party.

Democrats have repeatedly demagogued Republicans as “the party of no” even when THEY had been the party of no when Republicans were in charge. But being the party of no is a GOOD THING when the party in power seeks to pass one awful, America-destroying bill after another.

The pundits have rightly compared the gigantic ObamaCare bill with the Roosevelt administration – if nothing else than because we haven’t seen any government program so gigantic since then.

In a way that is very fitting. Because we can bookend December 7, 1941 and March 21, 2010 with the same prediction: a day that shall live in infamy.

December 7th was a disaster because FDR utterly failed to see a clear and present danger building on opposite sides of both oceans. We failed to take precautions. We failed to arm ourselves. We even failed to protect ourselves. What made it so criminal was that we had years of ample warning, but simply chose to ignore it.

March 21 was hardly a surprise, either. Just as with December 7, a lot of Americans saw it coming, but lacked the power to do anything but point and shout about the coming disaster. The major difference is that on December 7, 1941, our government failed to protect our way of life, whereas on March 21, 2010, our government actively attacked our way of life.

And now it is here. And now that it is here, it will grow like a cancer. Slowly at first – it doesn’t fully kick in until 2014 – and then it will erupt like a big poisonous mushroom.

“Nonetheless, it will be the law of the land as of tonight and we’re going to be a different country. We are on our way, there is absolutely no chance we are not going to end up with national health care. This is nationalizing health care, the insurance companies are now utilities, they are contractors. the government makes all of these decisions, only a matter of time and will probably happen after the Obama administration. But he will be remembered as the father of national health care as they have in Canada or Britain and it starts tonight.”

This bill is “not going to protect consumers from these rapid premium increases

It provides “no guarantees of any control over premiums”

It is “forcing people to buy private insurance”

It’s going to result in “five consecutive years of double-digit premium increases”

“I just don`t see that this bill is the solution”

“The insurance companies are the problem and we`re giving them a version of a bailout”

“This bill doesn`t change the fact that the insurance companies are going to keep socking it to the consumer”

It results in a “giveaway to the insurance industry”

“You`re building on sand. There`s no structure here”

If we pass this bill, “all we`re going to have is more poverty in this country”

If we pass this bill, “people aren`t going to get the care that they need”

This remaking of private insurance companies as utilities, as contractors for the government, is fascism, pure and simple. The government didn’t nationalize them, as it would do under communism, but it created a massive new set of regulations, and bureaucracies, and mandates, and taxes that quintessentially takes them over as agents of the state. And that is what fascism is all about:

Where socialism [i.e., communism] sought totalitarian control of a society’s economic processes through direct state operation of the means of production, fascism sought that control indirectly, through domination of nominally private owners. Where socialism nationalized property explicitly, fascism did so implicitly, by requiring owners to use their property in the “national interest”–that is, as the autocratic authority conceived it. (Nevertheless, a few industries were operated by the state.) Where socialism abolished all market relations outright, fascism left the appearance of market relations while planning all economic activities.

And that is exactly what is happening. Liberals may not like my term, but it couldn’t be more applicable here. Obama demonized the insurance companies, and he will now regulate and control and dominate them “in the national interest.”

“I think that if you take a step back from this the real story here is is the deficit and that story. Everybody’s familiar with the debt clock; we’ve all seen how fast it moves. This is going to put it on double time or triple time because when you go back and you look at the history of entitlements in the country, that’s the pattern. There are promises that this is going to cut deficits or debt, and it never does. You look back at at what FDR said when he signed Social Security into law in July 1935. He said it would act as a protection for future administrations against the necessity of going deeply into debt to furnish relief to the needy. He also said this is a law that will take care of human needs and at the same time provide the United States and economic structure of vastly greater soundness. Social Security today? $43 Trillion dollar unfunded liability – that’s 400 thousand dollars per household in the United States today. And you go back to 1965. LBJ did the same thing. You saw Nancy Pelosi carrying the gavel – it’s the same argument. He said it would be $1.50 a month for the average worker. $1.50 a month. Three dollars per month after you’re 65. Today, Medicare has a $57 trillion dollar unfunded liability. $500,000 dollars per American household. This will bankrupt the country.”

It is a structure intended to lessen the force of possible future depressions. It will act as a protection to future Administrations against the necessity of going deeply into debt to furnish relief to the needy. The law will flatten out the peaks and valleys of deflation and of inflation. It is, in short, a law that will take care of human needs and at the same time provide for the United States an economic structure of vastly greater soundness.

Does that sound like something that lessened the force of possible future ANYTHING? A protection to future administrations against the necessity of going deeply in debt??? Something that provides the United States with an economic structure of vastly greater soundness??? We’re doomed.

Maybe you don’t care that this giant boondoggle is going to crash and burn your country, and that your children or grandchildren will literally die as a result of your greed and selfishness. But I do.

They promised us a bogus Utopia, and that Utopia is about to collapse into the fiery pit of hell.

During your working years, the people of America–you–will contribute through the social security program a small amount each payday for hospital insurance protection. For example, the average worker in 1966 will contribute about $1.50 per month. The employer will contribute a similar amount. And this will provide the funds to pay up to 90 days of hospital care for each illness, plus diagnostic care, and up to 100 home health visits after you are 65. And beginning in 1967, you will also be covered for up to 100 days of care in a skilled nursing home after a period of hospital care.

And under a separate plan, when you are 65–that the Congress originated itself, in its own good judgment–you may be covered for medical and surgical fees whether you are in or out of the hospital. You will pay $3 per month after you are 65 and your Government will contribute an equal amount.

Let me tell you how Medicare affects me: It affects me with a $57 trillion unfunded liability. It affects me with a bill of $500,000 for every single household in America. It affects me with an individual bill (that every single man, woman, and child in this country owes) of $230,000.

And that’s $230,ooo on top of the $184,000 I owe for Medicare. I owe $414,000. And my household owns $900,000. And great googly moogly, we don’t got it. We’re on a speeding train that is going to keep hurtling along until it flies off a cliff and crashes.

And that “47 million” clearly includes 17 million illegal immigrants. The Democrats’ incredibly cynical plan is to take health resources from you and from your children and grandchildren and give those resources to illegal immigrants so they can capture the Hispanic vote.

The metaphor is a dozen people rushing into your house to eat your food and consume your resources while your own kids go hungry. No one would do this. But your government is doing it under Democrat Party tyranny.

The real cost of this bill is over $6 TRILLION. The Democrats filled their legislation with gimmicks, such as assuming they would cut doctors’ Medicare reimbursements by 21% when they know they won’t, then putting that “Doctor fix” in another bill. That will add $208 billion to the real cost of their plan. Then they falsely start the bill’s ten-year score in 2010, when the benefits don’t start getting paid out until 2014. That accounting deceit masks the fact that the REAL cost of the bill is $2.3 trillion.

In other words, your ObamaCare – which really isn’t even deficit neutral at all – was sold as “deficit neutral” because it doesn’t count the trillions and trillions of dollars that American citizens will be compelled by their government to pay for health insurance.

ObamaCare amounted to the slitting of the national wrists. And we’re going to start bleeding out until we either abandon it or die.

The Republicans have a few more tactics to fight this bill, but they amount to starting backfires to try to temporarily contain a massive hungry forest fire. It won’t be enough, and it probably won’t ultimately succeed.

You will be hearing about the Democrats “paying” for their health care takeover. Don’t believe it. Again and again and again, Democrats have sold one health care boondoggle after another, claiming that it will “only” cost such-and-so. They have a perfect track record — of failure to live up to their claims.

Washington has just run a $1.4 trillion budget deficit for fiscal 2009, even as we are told a new health-care entitlement will reduce red ink by $81 billion over 10 years. To believe that fantastic claim, you have to ignore everything we know about Washington and the history of government health-care programs. For the record, we decided to take a look at how previous federal forecasts matched what later happened. It isn’t pretty.

Let’s start with the claim that a more pervasive federal role will restrain costs and thus make health care more affordable. We know that over the past four decades precisely the opposite has occurred. Prior to the creation of Medicare and Medicaid in 1965, health-care inflation ran slightly faster than overall inflation. In the years since, medical inflation has climbed 2.3 times faster than cost increases elsewhere in the economy. Much of this reflects advances in technology and expensive treatments, but the contrast does contradict the claim of government as a benign cost saver.

Next let’s examine the record of Congressional forecasters in predicting costs. Start with Medicaid, the joint state-federal program for the poor. The House Ways and Means Committee estimated that its first-year costs would be $238 million. Instead it hit more than $1 billion, and costs have kept climbing.

Thanks in part to expansions promoted by California’s Henry Waxman, a principal author of the current House bill, Medicaid now costs 37 times more than it did when it was launched—after adjusting for inflation. Its current cost is $251 billion, up 24.7% or $50 billion in fiscal 2009 alone, and that’s before the health-care bill covers millions of new beneficiaries.

Medicare has a similar record. In 1965, Congressional budgeters said that it would cost $12 billion in 1990. Its actual cost that year was $90 billion. Whoops. The hospitalization program alone was supposed to cost $9 billion but wound up costing $67 billion. These aren’t small forecasting errors. The rate of increase in Medicare spending has outpaced overall inflation in nearly every year (up 9.8% in 2009), so a program that began at $4 billion now costs $428 billion.

The Medicare program for renal disease was originally estimated in 1973 to cover 11,000 participants. Today it covers 395,000, at a cost of $22 billion. The 1988 Medicare home-care benefit was supposed to cost $4 billion by 1993, but the actual cost was $10 billion, because many more people participated than expected. This is nearly always the case with government programs because their entitlement nature—accepting everyone who meets the age or income limits—means there’s no fixed annual budget.

One of the few health-care entitlements that has come in well below the original estimate is the 2003 Medicare prescription drug bill. Those costs are now about one-third below the original projections, according to the Medicare actuaries. Part of the reason is lower than expected participation by seniors and savings from generic drugs.

But as White House budget director Peter Orszag told Congress when he ran the Congressional Budget Office, the “primary cause” of these cost savings is that “the pricing is coming in better than anticipated, and that is likely a reflection of the competition that’s occurring in the private market.” The Centers for Medicare and Medicaid Services agrees, stating that “the drug plans competing for Medicare beneficiaries have been able to establish greater than expected savings from aggressive price negotiation.” It adds that when given choices “beneficiaries have overwhelmingly selected less costly drug plans.”

Yet liberal Democrats fought that private-competition model (preferring government drug price controls), just as they are trying to prevent private health plans from competing across state borders now.

The lesson here is that spending on nearly all federal benefit programs grows relentlessly once they are established. This history won’t stop Democrats bent on ramming their entitlement into law. But every Member who votes for it is guaranteeing larger deficits and higher taxes far into the future. Count on it.

You should notice the bit about the prescription drug benefit passed under Bush, because Democrats have routinely demonized it. They claim that Republicans didn’t even TRY to pay for it, but merely increased the deficit. That is for the most part true, but at least it a) relied upon the private sector to provide the benefit, and b) didn’t socialize the entire economy in the process. Democrats argue that, unlike Republicans with the prescription drug benefit, they are trying to “pay” for their plan. Just as right now I am flapping my arms and trying to fly out of my chair.

As much as Democrats want to demonize the Bush prescription drug benefit, it remains the anomaly as being the ONLY government health care program that ran under budget, as opposed to ten times budget.

We can’t allow the Medicare system to collapse, as it is on the verge of doing. Too many elderly people who don’t have recourse to anything else are counting on it. But the gigantic hole of red ink is proof that we never should have started this program until we truly counted the cost. Had the government not foisted Medicare upon us, the private market would have solved the problem better.

Anybody who thinks we can save one giant government program by creating an even more giant government program is a fool. It is the mindset of one who believes the best way to get out of a hole is to dig deeper and faster.

The health care plan that the Democrats are envisioning will be a FAR greater black hole of debt than anything this country has ever seen. Because it is FAR more ambitious, involves FAR more people, and involves a FAR greater takeover of the US economy.

And, incredibly, the Democrats are literally using the argument of the skyrocketing deficit to enact something that will massively increase our deficits.

We are facing the largest federal deficits since World War II. That should really scare you, because in World War II, it was AMERICANS who held that debt by purchasing war bonds. Back then, Americans actually saved their money. Quite different from these days, when we routinely go into debt to buy a lot of crap that we don’t need. Today it is CHINA who holds our debt. So as we begin to contemplate the $800 billion a year in interest payments that we will soon be paying, we realize that we are no longer our own masters.

If that isn’t bad enough, consider this: at the end of World War II, the United States had the greatest manufacturing and industrial base the world had ever seen. Today, we have only a tiny fraction of that former capability. In addition to being a debtor nation, we are also a “service” nation. You don’t spend your way out of debt; you don’t even service your way out of debt. You produce your way out of debt. We have long since lost the capability to do that.

Finally, the debts accrued during World War II were debts that were a) necessary and b) temporary. That, also, is no longer true today. Our World War II debts were the result of our war of necessity against the greatest evil humankind had ever seen; the debts we are experiencing today are the result of our war against our children’s children’s children’s children’s children’s children as we demand more and more benefits at somebody’s else’s expense.

The first seven months of the Obama administration seemingly make no sense. Why squander public approval by running up astronomical deficits in a time of pre-existing staggering national debt?

Why polarize opponents after promising bipartisan transcendence?
Why create vast new programs when the efficacy of big government is already seen as dubious?

But that is exactly the wrong way to look at these first seven months of Obamist policy-making.

Take increased federal spending and the growing government absorption of GDP. Given the resiliency of the U.S. economy, it would have been easy to ride out the recession. In that case we would still have had to deal with a burgeoning and unsustainable annual federal deficit that would have approached $1 trillion.

Instead, Obama may nearly double that amount of annual indebtedness with more federal stimuli and bailouts, newly envisioned cap-and-trade legislation, and a variety of fresh entitlements. Was that fiscally irresponsible? Yes, of course.

But I think the key was not so much the spending excess or new entitlements. The point instead was the consequence of the resulting deficits, which will require radically new taxation for generations. If on April 15 the federal and state governments, local entities, the Social Security system, and the new health-care programs can claim 70 percent of the income of the top 5 percent of taxpayers, then that is considered a public good — every bit as valuable as funding new programs, and one worth risking insolvency.

Individual compensation is now seen as arbitrary and, by extension, inherently unfair. A high income is now rationalized as having less to do with market-driven needs, acquired skills, a higher level of education, innate intelligence, inheritance, hard work, or accepting risk. Rather income is seen more as luck-driven, cruelly capricious, unfair — even immoral, in that some are rewarded arbitrarily on the basis of race, class, and gender advantages, others for their overweening greed and ambition, and still more for their quasi-criminality.

“Patriotic” federal healers must then step in to “spread the wealth.” Through redistributive tax rates, they can “treat” the illness that the private sector has caused. After all, there is no intrinsic reason why an auto fabricator makes $60 in hourly wages and benefits, while a young investment banker finagles $500.

Or, in the president’s own language, the government must equalize the circumstances of the “waitress” with those of the “lucky.” It is thus a fitting and proper role of the new federal government to rectify imbalances of compensation — at least for those outside the anointed Guardian class. In a 2001 interview Obama in fact outlined the desirable political circumstances that would lead government to enforce equality of results when he elaborated on what he called an “actual coalition of powers through which you bring about redistributive change.”

Still, why would intelligent politicians try to ram through, in mere weeks, a thousand pages of health-care gibberish — its details outsourced to far-left elements in the Congress (and their staffers) — that few in the cabinet had ever read or even knew much about?

Once again, I don’t think health care per se was ever really the issue. When pressed, no one in the administration seemed to know whether illegal aliens were covered. Few cared why young people do not divert some of their entertainment expenditures to a modest investment in private catastrophic coverage.

Warnings that Canadians already have their health care rationed, wait in long lines, and are denied timely and critical procedures also did not seem to matter. And no attention was paid to statistics suggesting that, if we exclude homicides and auto accidents, Americans live as long on average as anyone in the industrial world, and have better chances of surviving longer with heart disease and cancer. That the average American did not wish to radically alter his existing plan, and that he understood that the uninsured really did have access to health care, albeit in a wasteful manner at the emergency room, was likewise of no concern.

The issue again was larger, and involved a vast reinterpretation of how America receives health care. Whether more or fewer Americans would get better or worse access and cheaper or more expensive care, or whether the government can or cannot afford such new entitlements, oddly seemed largely secondary to the crux of the debate.

Instead, the notion that the state will assume control, in Canada-like fashion, and level the health-care playing field was the real concern. “They” (the few) will now have the same care as “we” (the many). Whether the result is worse or better for everyone involved is extraneous, since sameness is the overarching principle.

We can discern this same mandated egalitarianism beneath many of the administration’s recent policy initiatives. Obama is not a pragmatist, as he insisted, nor even a liberal, as charged.

Rather, he is a statist. The president believes that a select group of affluent, highly educated technocrats — cosmopolitan, noble-minded, and properly progressive — supported by a phalanx of whiz-kids fresh out of blue-chip universities with little or no experience in the marketplace, can direct our lives far better than we can ourselves. By “better” I do not mean in a fashion that, measured by disinterested criteria, makes us necessarily wealthier, happier, more productive, or freer.

Instead, “better” means “fairer,” or more “equal.” We may “make” different amounts of money, but we will end up with more or less similar net incomes. We may know friendly doctors, be aware of the latest procedures, and have the capital to buy blue-chip health insurance, but no matter. Now we will all alike queue up with our government-issued insurance cards to wait our turn at the ubiquitous corner clinic.

None of this equality-of-results thinking is new.

When radical leaders over the last 2,500 years have sought to enforce equality of results, their prescriptions were usually predictable: redistribution of property; cancellation of debts; incentives to bring out the vote and increase political participation among the poor; stigmatizing of the wealthy, whether through the extreme measure of ostracism or the more mundane forced liturgies; use of the court system to even the playing field by targeting the more prominent citizens; radical growth in government and government employment; the use of state employees as defenders of the egalitarian faith; bread-and-circus entitlements; inflation of the currency and greater national debt to lessen the power of accumulated capital; and radical sloganeering about reactionary enemies of the new state.

The modern versions of much of the above already seem to be guiding the Obama administration — evident each time we hear of another proposal to make it easier to renounce personal debt; federal action to curtail property or water rights; efforts to make voter registration and vote casting easier; radically higher taxes on the top 5 percent; takeover of private business; expansion of the federal government and an increase in government employees; or massive inflationary borrowing. The current class-warfare “them/us” rhetoric was predictable.

Usually such ideologies do not take hold in America, given its tradition of liberty, frontier self-reliance, and emphasis on personal freedom rather than mandated fraternity and egalitarianism. At times, however, the stars line up, when a national catastrophe, like war or depression, coincides with the appearance of an unusually gifted, highly polished, and eloquent populist. But the anointed one must be savvy enough to run first as a centrist in order later to govern as a statist.

Given the September 2008 financial meltdown, the unhappiness over the war, the ongoing recession, and Barack Obama’s postracial claims and singular hope-and-change rhetoric, we found ourselves in just such a situation. For one of the rare times in American history, statism could take hold, and the country could be pushed far to the left.

That goal is the touchstone that explains the seemingly inexplicable — and explains also why, when Obama is losing independents, conservative Democrats, and moderate Republicans, his anxious base nevertheless keeps pushing him to become even more partisan, more left-wing, angrier, and more in a hurry to rush things through. They understand the unpopularity of the agenda and the brief shelf life of the president’s charm. One term may be enough to establish lasting institutional change.

Obama and his supporters at times are quite candid about such a radical spread-the-wealth agenda, voiced best by Rahm Emanuel — “You don’t ever want a crisis to go to waste; it’s an opportunity to do important things that you would otherwise avoid” — or more casually by Obama himself — “My attitude is that if the economy’s good for folks from the bottom up, it’s gonna be good for everybody. I think when you spread the wealth around, it’s good for everybody.”

So we move at breakneck speed in order not to miss this rare opportunity when the radical leadership of the Congress and the White House for a brief moment clinch the reins of power. By the time a shell-shocked public wakes up and realizes that the prescribed chemotherapy is far worse than the existing illness, it should be too late to revive the old-style American patient.

In their 1966 article, Cloward and Piven charged that the ruling classes used welfare to weaken the poor; that by providing a social safety net, the rich doused the fires of rebellion. Poor people can advance only when “the rest of society is afraid of them,” Cloward told The New York Times on September 27, 1970. Rather than placating the poor with government hand-outs, wrote Cloward and Piven, activists should work to sabotage and destroy the welfare system; the collapse of the welfare state would ignite a political and financial crisis that would rock the nation; poor people would rise in revolt; only then would “the rest of society” accept their demands.

The Strategy was first elucidated in the May 2, 1966 issue of The Nation magazine by a pair of radical socialist Columbia University professors, Richard Andrew Cloward and Frances Fox Piven. David Horowitz summarizes it as:

The strategy of forcing political change through orchestrated crisis. The “Cloward-Piven Strategy” seeks to hasten the fall of capitalism by overloading the government bureaucracy with a flood of impossible demands, thus pushing society into crisis and economic collapse.

“Make the enemy live up to their (sic) own book of rules,” Alinsky wrote in his 1989 book Rules for Radicals. When pressed to honor every word of every law and statute, every Judeo-Christian moral tenet, and every implicit promise of the liberal social contract, human agencies inevitably fall short. The system’s failure to “live up” to its rule book can then be used to discredit it altogether, and to replace the capitalist “rule book” with a socialist one. (Courtesy Discover the Networks.org)

Their strategy to create political, financial, and social chaos that would result in revolution blended Alinsky concepts with their more aggressive efforts at bringing about a change in U.S. government. To achieve their revolutionary change, Cloward and Piven sought to use a cadre of aggressive organizers assisted by friendly news media to force a re-distribution of the nation’s wealth.

In their Nation article, Cloward and Piven were specific about the kind of “crisis” they were trying to create:

By crisis, we mean a publicly visible disruption in some institutional sphere. Crisis can occur spontaneously (e.g., riots) or as the intended result of tactics of demonstration and protest which either generate institutional disruption or bring unrecognized disruption to public attention.

No matter where the strategy is implemented, it shares the following features:

The offensive organizes previously unorganized groups eligible for government benefits but not currently receiving all they can.

The offensive seeks to identify new beneficiaries and/or create new benefits.

The overarching aim is always to impose new stresses on target systems, with the ultimate goal of forcing their collapse.

Nobody wants to believe that a large and influential group of our leaders would want to create a catastrophe as a means of having an opportunity to impose their will upon an ensuing “super-government” that would necessarily have to arise from the ashes. The concept strikes many as madness.

Only it’s happened too many times in just this century to label as “madness.” It is, in fact, the goal of virtually every revolutionary movement. You have to tear down the old in order to create the new.

Consider the fact that the leftist organizers of the 1960s – like Barack Obama’s friend and mentor William Ayers, who was instrumental in Obama’s early career and his run in politics – are very much still around and still profoundly shaping the leftist agenda. Take Ayers’ Weather Underground co-founder Jeff Jones, whose Apollo Alliance wrote a big chunk of Obama’s stimulus package. Take Tom Hayden (who endorsed Obama), leader of the leftist group Students for a Democratic Society. He proclaimed in a landmark 1962 speech that the youth must wrest control of society from their elders, and that to that end universities had to be transformed into incubators of revolutionary “social action.” And his calls to use any means necessary to achieve that “social action” – certainly including violence and force – colored and in fact defined the entire 60s leftist radicalism. Hayden was one of the writers of the “Berkeley Liberation Program.” Some highlights: “destroy the university, unless it serves the people”; “all oppressed people in jail are political prisoners and must be set free”; “create a soulful socialism”; “students must destroy the senile dictatorship of adult teachers.” And his “community outreach” fomented horrific race riots.

These people are still dictating the agenda of the left today. They were trying to fundamentally transform society then, and they are trying to fundamentally transform society today. Only their tactics have changed; the goal remains the same.

You don’t think Barack Obama – who was in turn mentored by communist Frank Marshall Davis, by radical organizer Saul Alinsky, by terrorist William Ayers – (the link is to a CNN story demonstrating that Obama’s relationship to Ayers was MUCH deeper than Obama claimed) – doesn’t value these people and share their values? Then, to put it very bluntly, you are a fool. The words of our current president:

“To avoid being mistaken for a sellout, I chose my friends carefully.The more politically active black students. The foreign students. The Chicanos. The Marxist Professors and the structural feminists and punk-rock performance poets. We smoked cigarettes and wore leather jackets. At night, in the dorms, we discussed neocolonialism, Franz Fanon, Eurocentrism, and patriarchy. When we ground out our cigarettes in the hallway carpet or set our stereos so loud that the walls began to shake, we were resisting bourgeois society’s stifling constraints. We weren’t indifferent or careless or insecure. We were alienated.”

But of course, Obama really wasn’t alienated, by his own statement. He was a member of a community–a community of far-far-leftist radicals.

Well, let me tell you what the Cloward-Piven proponents believe will happen: they think the coming complete crash of our economic system will result in the complete takeover of the economy and the society by the state. They think that as panicked and hungry people look around at the disaster big government created, they will have no choice but to turn to government for help. They think that they will finally have the socialist utopia they always dreamed of but American independence and self-reliance would never allow.

If by some miracle in defiance of all the laws of economics Obama’s economic policy actually doesn’t kill our economy, Obama and Democrats will win big. If, far more likely, Obama’s economic policy causes a crash of the entire system, liberals believe that Democrats will ultimately STILL win big.

You can call me crazy if you like. But mark my words.

As you see things getting worse, and liberals using the complete and catastrophic failure of big government to justify even MORE and even BIGGER big government, what might seem crazy to you now will make a lot more sense.